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Where Taxpayers and Advisers Meet

Help with Pension Taper Relief Adjusted Income

alleywelles
Posts:2
Joined:Fri Mar 26, 2021 10:51 pm
Help with Pension Taper Relief Adjusted Income

Postby alleywelles » Fri Mar 26, 2021 11:06 pm

Hi All

I'm under a salary sacrifice scheme at work I'm struggling to get my head round the adjusted income calculation to work out carry forward options. Doing my calculation:

Net income + salary sacrifice = threshold income. This takes me over the threshold. for17/18 tax year
When I go onto the Adjusted income, the calculator tells me to add in Employer pension contributions. Do I add the total contributions my employer makes for me (including salary sacrifice) or just the pension contribution they make (7k).

Calculation for Adjusted income for 17/18 tax year is looking like:

Net income 157k + salary sacrifice 24k = threshold of 181k so over the 150k
Employer contributes 7k to my personal pension + the 24k I sacrifice.
Is my adjusted 157k + 7k or 157k + 24k

thanks
Alley

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: Help with Pension Taper Relief Adjusted Income

Postby someone » Sat Mar 27, 2021 10:21 am

You don't double count. I agree it's very confusing!

I think the calculation described is actually 133 + 31 - but that gives the same answer as your 157+7.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Help with Pension Taper Relief Adjusted Income

Postby robbob » Sat Mar 27, 2021 10:55 am

here is a reasonably well laid out example

https://www.pruadviser.co.uk/knowledge-literature/oracle-plus/tapered-annual-allowance/#

I must admit its such an easy area to go wrong here that i am loathe to comment as i don't look at this area very often.

Presuming your only salary sacrafice are pension payments and presuming your and note in defined benefit scheme (where pip would be used !! - eg NHS - police?)

I would expect the total to be

P60 total
+ employers contributions into your penions including salary sacrafice
+ employees contributions deducted from gross salary (net pay arrangement amounts that are deducted from your gross salary - don't ask why net pay arrangements are called what they are as the name is highly misleading !)

other adjustments to taxable income may affect calcs


very simpolistic double check If you had 180k base salary and 20k employers contributions into your pension - i would expect adjusted income would be the sum of these two items - on calcs above your taxable pay is reduced by salary sacrafice amounts and also any normal employee pension dediuctions from gross salary - these amounts are added back in to get you back to that real salary level of 200k

My calcs could be totally wrong here !

Ok lets look at going via the net income method of calculation - this is where i get the hebbeeejeeebes the hmrc official layout is so poorly worded that i simply don't trust the wording despite the advise being the correct place to go to find teh answer - i would normally say NVER rely on third pary websites as they could be wrong and you have zero comeback if they are (you may not have mych comeback with hmrc either). So i will bow our ref doing

Looking at your figures i am guesing you had icnome as follows
181k base salary
7k empoloyers contribution
robbox expected adjusted income of 188k
24k salary sacrafice
taxable pay per p60 = 157k - this is net income as advised by you

lets go here and scroll down to adjusted income
https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

1 - net income = 157k as advised by you

3 Add pension savings made to your pension schemes where tax relief was given (because your employer took them out of your pay before deducting Income Tax). +24k
For salary sacrafice - your employer reduced your taxable pay here to add these contributions !
5. Add the amount of pension savings your employer made for you. 7k employer contribution

so we have 157+24+7 = 188k - bingo

note many people have shouted bingo when they don't have a full house and are then made to look stupid - robbob may be one if these accidental fibbers.

alleywelles
Posts:2
Joined:Fri Mar 26, 2021 10:51 pm

Re: Help with Pension Taper Relief Adjusted Income

Postby alleywelles » Mon Mar 29, 2021 12:54 pm

Thanks for the replies.


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